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Tiner calls for stress test to stop missales

FSA chief executive John Tiner has warned financial companies to stress-test new products against big stock- market falls and check that the products are appro- priate for their target customers to help guard aga- inst misselling.

Tiner, speaking at the FSA annual asset management conference in London on Monday this week, said that by incorporating testing at the product design stage, firms can identify that the right safeguards are built into the sales and after-sales processes to prevent misselling or even withdraw any products from sale if faults are shown.

Tiner said that this would help to prevent a repeat of the problems experienced in the industry with precipice bonds and split-capital investment trusts.

Over the next year, the FSA is to carry out further ana- lysis to clarify the division of responsibilities between product providers and distributors, reviewing the extent to which product pro- viders are responsible for the selling of their products, particularly when their performance may vary accor- ding to different market conditions.

The regulator has also launched a probe into the pricing of unit-linked funds, reviewing whether firms’ controls in this area are lik- ely to lead to customer detriment and undermining confidence in the market.

It is working with the Association of British Insurers to produce guidelines for unit-linked funds.

Tiner intends to consult on the issue of dual-pric- ing of mutual funds, with Oeics set to be allowed to dual-price to bring them in line with pricing on unit trusts in the second quar- ter of 2006.

Tiner said: “So-called precipice bonds and split-cap- ital investment trusts have highlighted the downside of serious mismatches between product characteristics and consumer needs.”


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FSA approved precipice bond brochures by NDF

The FSA had been checking NDF extra-income and growth plan marketing material for five years before thousands of investors lost much of their capital on the plans. Money Marketing has seen an FSA note of a meeting between NDF and the FSA in December 1999 in which the regulator questioned NDF marketing material. The note […]

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Skandia rejected Old Mutual bid for lacking industrial logic

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